Keeping business expenses under control while offering colleagues more flexibility in their spending? Sounds contradictory, but it is possible. That is, if your spend management is in order.
Spend management (also called expense management) is the art of structuring, simplifying and facilitating the management of your employees’ business expenses.
Not very exciting per se, but much needed if you want to keep expenses under control. The beauty of it: if the basics are set up right, the rest will follow (almost) automatically.
Controlling expenditure more complicated than you think
Business spend management is all about the expenditures of colleagues. About recurring depreciation and infrequent purchases. Changing budgets and different responsibilities. Large sums and small amounts.
It touches everything (besides the standard operational costs) that is needed to keep your organization running and moving forward. From travel expenses to meal allowances and from office supplies to software subscriptions.
Spend management is about predicting, anticipating and reacting quickly. Deciding who is allowed to spend which amount, on what and why.
A major challenge in this complex process? Providing the right guidance. To colleagues who have business expenses, and to those who check them.
Per diem spend system
Finance teams know how the per diem system in Germany works. Before the business trip, the employee submits a request and receives funds for expenses during the trip.
Funds are usually provided in advance. Using this per diem process removes the need for:- receipts to be provided for justification afterwards;- equalizes the playing field for employees;- there’s no need anymore to be reported for employee’s taxes.
That’s why spend management is indispensable
Traditionally, business expense management revolves around the tension between maintaining control (a goal of your finance department) and having freedom (the wish of employees who have business expenses).
Of course, a bit of tension is healthy. It keeps you on your toes. But it is also important to find the right balance.
Because, on the one hand, exercising too much financial control can slow down the growth of your organization. On the other hand, employees are sometimes too assuming about business expenses.
This can lead to friction about reimbursements, disagreements about expense justifications or tricky budget issues. And that is the last thing you want.
Therefore, you should take your expense management to the next level.
Improve the foundations of your spend management system
There are many ways to get a better handle on business expenses. Yet many organizations don’t manage to do so. The biggest culprit? Uncertainty. Therefore, invest in creating a better foundation.
Provide a clear expense policy
Do your colleagues, teams and/or departments know exactly how much they are allowed to spend, on what, in what situations and whom they need to ask for approval (if the case)?
Few people will immediately be crazy about the idea of a watertight spending policy, but it is very important to set boundaries and avoid grey areas.
Make sure that (all) budgets are easy to handle, and are based on the spending habits and liquidity of the company.
So, a document which employees can claim which types of expenses. And, what the budget limits are per day, week or month. For example a maximum of 50 euros per employee per month for business meals.
You can set rules on which payment methods may be used, what types of receipts or invoices you accept and what transactions details are needed for a justification.
This transparency helps everyone in your company make better decisions and be more conscious of business expenditure.
Create centralized understanding and insight
Especially if your organisation is on the large side, chances are that you work with different budgets. For IT, marketing and sales, for example.
Are budgets in your organization set at the beginning of a quarter or year, and is each department or team then responsible for its own bookkeeping?
In that case, there is a good chance that your finance department is losing the plot. Because a lack of transparency and the right tools make it virtually impossible to keep track of all these scattered expenses in real-time.
Standardized processes, full disclosure of expenses and centralization of expense records help you regain and maintain control.
Reduce the risk of human error
Almost every organisation has created some form of spend management. Yours probably has too.
Do you use complex Excel sheets, petty cash boxes full of paper receipts, expense justification software, apps or a combination? The more manual the processes are, the greater the number of errors.
Data might not be entered correctly or misinterpreted. Or recorded too late and/or edited after review.
Making mistakes is human. So automate, streamline, simplify. Everything to avoid errors and missing data.
Spend management to the next level in three steps
Step 1. Digitalize justifications with smart software
Smooth processes for expense justification are still one of the biggest challenges within spend management for many organizations.
To ensure easy processing, employees first need to know what they can and cannot claim. Next, they must submit all receipts on time, through the proper channels and with a complete description.
By automating this process via an app, you speed up the process considerably and are able to scale down the paper-based accounting system. A nice bonus: if you link an electronic payment card to the app, receipts are automatically allocated to the right transactions.
Step 2. Offer suitable payment methods
Do you want to optimally support efficient and safe spending? Make sure that your colleagues always have a suitable means of payment.
Cash advances and credit cards are fine, but they create an unnecessary administrative hassle. It is better to choose prepaid debit cards. Because those you can easily integrate into an automated justification process.
For example, set up monthly or quarterly budget top-ups, so cardholders always know exactly what they can spend in that period. And behind the scenes, your finance team has real-time insight into spending.
This way you can completely replace cash with cards and you casually regain more control over business expenses.
Step 3. Integrate spend management with your accounting programme
To gain even more control over your spend management, you can also create links (for example via APIs) between the business expense tool and your accounting program.
Useful for when you use customized cost categories, cost centres and VAT rates. Or if you want to be able to automatically assign certain cost centres to specific projects or customers. Because then everything will be linked to the correct ledger numbers in your bookkeeping system.
A centralized (digital) management system will help you enormously in verifying the allocation of payment cards, budgets and approvals of expenses.
With such a system you will have real-time insight into the business expenses of each employee and team. By integrating the tool directly into your accounting system, spend management becomes a smooth and watertight process.
Contact us about spend management
Are you wondering about how you can easily implement SimpledCard within your organization, so that your employees can organize their expense justifications more easily and your finance team can quickly get a grip on spend management?
Our financial experts are happy to discuss with you which solutions best suit your organization, wishes and ambitions.